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Congress Is Starting to Understand That Free Trade Agreements Don’t Work

April 18, 2016

I’ve been fighting free trade since 2008. For most of that time, while much of the public has been sympathetic, it’s been an uphill battle with Congress. I used to lobby on Capitol Hill, and I frequently got no better than bored politeness from Congressional offices.

So I’m very glad to report that things are changing. Here’s a report (lightly edited for clarity) I just got from the head of the Coalition for a Prosperous America, the organization whose advisory board I am on.

CPA held its annual DC Fly-In this week. CPA members from across the country fanned out across the Capitol. CPA is now taken very seriously by congressional offices. They trust what we say. One-fourth of our meetings included the congressman/woman themselves, which is significant and a new high for us. Senior staffers attended our meetings, rather than junior staffers, as was the case only a few years ago.

Here are some arguments we have either won or made tremendous headway with, after years of work:

1. Trade deficits matter, they kill jobs and growth: This may sound obvious to you and I, but many legislators and staffers did not believe trade deficits mattered in the past. That is why we have constantly focused part of our DC message on simply establishing why this deficit not only matters, but is core to our economic malaise. If trade deficits are not a problem, there is no need to pursue a solution. This past week showed we have largely won that argument. We can only grow jobs and our economy if we fix this problem.

2. Past trade agreements have not improved our trade performance: The establishment has always fed us and Congress this line: “Trade agreements establish American leadership, grow exports and create jobs.” CPA members trounced this argument this year by showing the poor trade performance of our past agreements through visual aids we spent a lot of time developing. We clearly showed that modern foreign mercantilism has moved beyond the tariff and non-tariff barrier provisions in trade deals. Indeed those deals often made our trade problems worse. Instead we need to focus upon a national strategy to balance trade by identifying the biggest trade cheating problems and aggressively fixing them.

3. The TPP will likely make America worse off: We read and digested thepro-TPP studies by paid economic hacks that try to hide the problems and exaggerate gains. Then we displayed the results through insightful infographics showing that any projected gains were embarrassingly meager and fundamentally implausible. We showed how those studies were built upon a series of demonstrably false assumptions to produce those meager gains. Then we showed why losses to American workers, industry and the economy were nearly certain when you eliminated the false assumptions.

4. Tax reform can fix some major foreign trade cheating on a large scale: Tax reform is a challenge because K Street lobbyists rig the game for special interests and no connection is made with our success in producing here and winning the international trade competition. However, we made significant gains in showing how we can fight foreign consumption taxes that act as tariffs by smartly adding a US consumption tax and funding the reduction of other regressive taxes and costs to fix the problem. We also showed how we can fix the corporate income tax system with sales factor apportionment to halt tax haven abuse by transnationals, incentivize US domestic production, and make foreign companies pay their fair share of income tax when selling into the lucrative American market.

Other observations:

Happily, everyone seems to agree that the TPP does not have the votes to pass right now. In my judgment, we are in a far better position to prevent future passage than we were at this stage of the game for Fast Track Trade Authority. We almost beat Fast Track last June. Indeed we won the first votes in regulation time but lost in overtime when the Empire Struck Back. Now, it seems that the anti-Fast Track block is holding strong and quite a lot of pro-Fast Track congressional members have either declared opposition to TPP or are leaning against it.

GOP House leadership pushed Fast Track through last year but they seem to view TPP as toxic now. The GOP rank and file are letting House leadership know they do not want to vote on TPP at any time in the foreseeable future. The Senate side is less solid and has always posed the bigger challenge. Senate majority leadership wants changes to TPP but still wants get to “yes.” However, the changes being demanded are difficult (but perhaps not impossible) to deliver.

The presidential election campaign rhetoric has been enormously helpful. It is a wild campaign with Trump and Sanders substantially outperforming any observers’ expectations. Trump and Sanders bring up our broken trade policy in almost every speech. We contributed to Clinton and Cruzflipping from trade agreement supporters to opponents. Trade is now one of the few, rare “voting issues”... an issue that actually moves voters to support or oppose a candidate.

We have a lot to do. We have not won yet. But we are currently winning by dramatically deterring the continuance of past stupidity. The establishment and the pundits are hyperventilating, writing many “reasoned” articles about why the voters simply don’t understand the “greater good.” They are working behind the scenes to stop this heresy. But the establishment has not only lost its clout, it is actively disbelieved by many in this current era.

So finally, after many years work by a lot of people, there’s reasonable hope that America’s slow-motion trade disaster will come to an end.